Comparing different capital structures

Assignment Help Finance Basics

Reference no: EM1363566

The company is comparing two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%.

So if i ignored taxes and compare both of these plans to an all equity plan assuming EBIT is $5,000 and the all equity plan is 6,000 shares of stock outstanding then which plan has a higher EPS? I also am confused on how to find the break even levels of EBIT for each plan compared to the all equity plan.

One last question, how would I know when the EPS for plans 1 and 2 will be identical?

Reference no: EM1363566

Questions Cloud

Calculate the break even point in the case : How much must each be sold to break even and how could you reduce this break even quantity?

Business analysis and financial reporting : What is shareholder's equity, how is it calculated, and where and how is it reported? What is comprehensive income and how does it influence equity? What happens to shareholder's equity when the firm issues more shares or buys back shares in the o..

Explain economy experiences an unexpected recession : Explain your answer the economy experiences an unexpected recession; the price of Good Z increases. The price of Good Y increases; the price of Good Z increases.

Address the burden of non-communicable disease : I would like some assistance detailing how the identification and treatment of multiple risk factors can be used to address the burden of non-communicable disease. My chosen disease is asthma.

Comparing different capital structures : The Corporation is planning two different capital structures. Plan 1 would result in 2,000 shares of stock and $40,000 in debt and plan 2 would result in 4,000 shares of stock and $20,000 in debt. The interest rate is 10%.

Determine initial tax basis : An apartment house was purchased on July 8 of last year, by a taxpayer who computes her taxes on a calendar basis. Her depreciation deduction last year was $7,902.

Rules of management by robert m. grant : From strictly a management position, what have been the key policies and procedures that allowed AES to be successful for 25 years?

At what average rate does the force from the cable : At what average rate does the force from the cable. A student standing on the ground throws a ball straight up. The ball leaves the student's hand with a speed of 15 {rm m}/{rm s} as the hand is 2.0 {rm m} above the ground.

Determining arying and fixed costs : What issues will create variances within a company? What other information can we derive from our variance analysis? What expenses would you imagine to be fixed in nature?

User Account

All Pages